1. Field of the Invention
The disclosed invention relates to marketing goods and services over the Internet and, in particular, detecting through controlled experiments a rate of loss of customers based on waiting time or purchase frequency.
2. Description of the Background
The Internet is growing at a prodigious rate. According to current estimates the amount of information transmitted over the Internet is doubling approximately every 100 days. This makes it likely that visitors to websites will encounter congestion and possibly lengthy waiting times to obtain service. Customers who are impatient will balk (leave the website), possibly in favor of a competitive site. It is desirable, therefore, to detect impatient customers and ensure that they are served prior to leaving.
Marketing in the Internet is of a very different character than traditional marketing. Visiting a physical store requires an investment of time on the part of the customer, and there are costs associated with leaving the stores, including the time to locate an alternative store, travel to the alternative store, and develop a new buyer/seller relationship. On the Internet, each of these functions is only a click away, and a customer once lost may never be regained. Such traditional forces as geographic proximity, which draw customer to brick-and-mortar stores, are absent on the Internet.
It is known in queuing at airports, for example, to provide separate queues for first-class and coach passengers. The reason is to provide a benefit to those who pay higher airfares, not to prevent balking. It is also known to divide airplane passengers into groups for boarding so the rear of the plan can be filled first to simplify loading. Here the reason is not to prevent balking but to optimize the time required to prepare the plane for takeoff.
It is known in the art of Internet marketing to observe when an existing customer has failed to make a purchase within a certain period of time, after which it is assumed that the customer has been “lost” or has gone inactive. Efforts are then made to awaken or recapture the customer with promotions, email or other contact. By that time, however, the customer may be irretrievably gone and may be purchasing regularly from another source.
It is not taught or suggested in the prior art to observe the customer's behavior dynamically during his period of interaction with the website to anticipate a possible defection and take steps to prevent it. The present invention comprises a method and apparatus for detecting and forestalling a defection before it occurs, as opposed to attempting to recapture the customer after he has gone.
In addition, with traditional commerce, customer retention methods are typically static, with change only occurring with major market changes. This has resulted in part because the costs associated with establishing and printing advertisements and coupons. Furthermore, it is difficult to offer different promotions to different purchasers in a traditional setting in which promotions are published or made publicly available.
However, e-commerce does not have to be so restricted. The introduction of e-commerce on the Internet has made it easier for Internet merchants to change customer retention methods by simply updating a Web page, email coupon or appropriate database/systems. The costs associated with printing catalogs and marking goods in a bricks-and-mortar setting are typically not present in eCommerce. In addition, it is also possible to offer different promotions to different customers without either customer learning the price that has been offered to the other.
Although it is possible for Internet merchants to update promotional offers at any time, typically they have not done so. One reason for sticking to static customer retention strategies is that is the accepted marketing strategy. Merchants are accustomed to keeping promotional offers static for a significant period of time. Moreover, in some cases, merchants have both brick-and-mortar shops and web shops, and want to keep prices, promotions and customer other retention methods in alignment. However, the primary reason why Internet merchants do not dynamically adjust customer retention methods with the ever-changing marketplace is that the merchants do not have the ability to dynamically determine optimal promotional levels.
The Internet is a dynamic marketplace. As e-commerce becomes a dominant force, the ability to dynamically adjust to and exploit changes in the Internet marketplace becomes critical. An enormous amount of detailed, disaggregate information is being routinely captured during Internet transactions. The ability to gather real-time information on transactions conducted on the Internet means that Internet merchants could use the information to dynamically update their websites to take advantage of market conditions. In particular, the availability of real-time transaction information opens up the possibility of dynamic pricing and marketing.
However, using the information to determine the dynamic, optimal price or promotional level is problematic. Although a great deal of real-time transactional information is available, businesses have no current method of analyzing the information in a manner that provides guidance to dynamically update pricing, marketing, promotions and other key market variables.
As enterprises move into high velocity environments in a networked economy, decisions based on data are ever more critical and can be leveraged to affect the bottom line. In this environment, information is highly valuable but comes with a high discount rate. That is, the value of the information rapidly depreciates. Current generation data analysis, profiling, and data mining methods do not effectively deal with this type of information, as current methods rely on a time-consuming sequential process of data gathering, analysis, implementation and feedback.
Current systems, including data mining methodologies, are typically retrospective, creating a significant lag in analysis time. The dynamic nature of the Internet makes even recent information utilized in those methods obsolete.
Some efforts have been made to use computer systems to estimate supply and demand, to adjust prices to perceived market conditions, or to vary prices based on the identity and purchasing history of the customer.
U.S. Pat. No. 5,752,238 discloses a consumer-driven electronic information pricing mechanism including a pricing modulator and pricing interface contained with a client system. However, in this reference, the customer selects from a menu of pricing options. It does not disclose or teach a real-time determination of price sensitivities.
U.S. Pat. Nos. 5,822,736 and 5,987,425 disclose a variable margin pricing system and method that generates retail prices based on customer price sensitivity in which products are grouped into pools from a first pool for the most price sensitive products to a last pool for the least price sensitive products. However, the price sensitivities are determined manually by the storekeeper based on his subjective impressions and are not obtained in real-time.
U.S. Pat. No. 5,878,400 discloses a method and apparatus for computing a price to be offered to an organization based on the identity of the organization and the product sought, but does not teach or suggest real-time price determination.
U.S. Pat. No. 5,918,209 discloses a method and system for determining marginal values for perishable resources expiring at a future time, such as an airline seat, hotel room night, or rental car day for use in a perishable resource revenue management system. Data for the perishable resources and composite resources is loaded from the perishable resource revenue management system into the marginal value system. The marginal values for the perishable resources are determined using a continuous optimization function using interdependencies among the perishable resources and the composite resources in the internal data structures. However, this reference does not disclose or teach elicitation of price sensitivities based on measuring customer behavior.
U.S. Pat. No. 5,926,817 discloses a client-server system and method for providing real-time access to a variety of database systems, one application of which is “dynamic price quoting.” However, the reference uses this phrase to mean computing a single price to be quoted to a customer based on information about the user's requirements and data contained in the supplier's databases. It does not teach or suggest experimentation to determine marketplace customer price sensitivity.
In general, the prior art teaches that it is useful to attempt to measure supply and demand as an aid in determining prices and promotional levels to retain customers. It is also known to utilize previously accumulated facts about a purchaser to influence the price or discounted price at which a particular product should be offered to him. However, the applicants are not aware of any prior art in which price, promotional level, and other market sensitivities are measured directly through use of controlled real-time experiments.
In view of the foregoing, it can be appreciated that a substantial need exists for a method and system for dynamically determining optimal promotional levels, promotional timing, and customer retention methods for products and services.